The domain and interpretation of utility functions: An exploration

Marc Le Menestrel () and Luk N. Van Wassenhove

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper proposes an exploration of the methodology of utility functions that distinguishes interpretation from representation. While representation univocally assigns numbers to the entities of the domain of utility functions, interpretation relates these entities with empirically observable objects of choice. This allows us to make explicit the standard interpretation of utility functions which assumes that two objects have the same utility if and only if the individual is indifferent among them. We explore the underlying assumptions of such an hypothesis and propose a non-standard interpretation according to which objects of choice have a well-defined utility although individuals may vary in the way they treat these objects in a specific context. We provide examples of such a methodological approach that may explain some reversal of preferences and suggest possible mathematical formulations for further research.

Keywords: Utility; representaion; interpretation; preference reversal (search for similar items in EconPapers)
JEL-codes: A12 D00 D81 (search for similar items in EconPapers)
Date: 2001-10
New Economics Papers: this item is included in nep-ent and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: The Domain and Interpretation of Utility Functions: An Exploration (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:576

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